Dave Tremblay helps his daughter Solenne walk as sister Elia plays in front of the Community Center at the Peloton in Boulder early last year.
(
CLIFF GRASSMICK
)

The owners of the Peloton housing development in Boulder have opted to lease units in the second phase of the project.

The move, officials say, is a temporary fix to ensure the long-term viability of the project off 38th Street and Arapahoe Avenue that "will be an owned condo community in the future."

Officials for Los Angeles-based CityView, the Peloton's developer and owner, late last year weighed leasing as an avenue to further the second phase, which consists of 195 units in two building shells that have sat dark since the project opened in 2008.

As of Monday, some leases have been inked and move-ins have occurred at one of those buildings, a 79-unit, four-story building that is under construction with a completion date targeted for early October, said Mark Beisswanger, managing director and executive vice president of CityView. The build-out of the remaining building should be finished next summer, he said.

"There's anecdotal evidence of the market getting better for 'for sale,'" Beisswanger said. "It was not good enough to warrant selling the residences at this time.

"I think it would undercut the value that the community's worth, not only for me but also for the current residents, if we sold for less than it's worth."

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The 190-unit first phase of the project opened as financial markets seized, real estate bubbles burst and a recession gripped the nation.

In recent years, Peloton officials slashed sales prices -- the residences that once ranged from $300,000 to more than $900,000 were advertised in the range of $200,000 to $500,000. Officials dropped other incentives to bring the first two buildings to more than 90 percent occupied.

"We did have to get through selling" the first phase, Beisswanger said. "At the same time, there was financial turmoil with respect to the entire real estate fund (for the Peloton and two dozen other projects across the United States)."

The financial uncertainty since has been resolved, which allowed for the second phase of the Boulder project to gain steam, he said. The market conditions, however, called for a different approach.

"We were working on a method for build-out ... the idea being, No. 1, to get the construction phase of the project over; No. 2, to get the project done and improve the viability of the retail spaces we have there," he said. "And, No. 3, with the additional residents, to get the HOA dues to decrease."

To address the homeowners association situation, CityView officials considered annexing the units in the second phase, as if they were condominiums, or establishing a license agreement with the rentals, he said.

The former could affect some forms of financing, notably government-based FHA loans, he said.

"If too many renters are in there, then some of the homeowners for the prior phases would have more difficult and more expensive alternatives for refinancing or selling," he said.

CityView officials have been in negotiations with an ad hoc committee of residents regarding the leasing and licensing developments.

Those discussions remain ongoing, members of the ad hoc committee told the Camera on Monday. They declined to provide further comment until the negotiations are complete.

If some of the Peloton units are converted to rental housing, CityView would be required to make cash-in-lieu payments to the city's affordable housing fund.

Last year, when CityView weighed leasing the units, an attorney speaking on behalf of the Rocky Mountain chapter of the Community Associations Institute said the decision to lease could cause some turmoil around existing residents.

Denver attorney Jerry Orten said the move could cause some concern from residents who felt they were buying into one concept they believe has since transformed into something else.

Additionally, having half of the Peloton essentially become an apartment complex could create a major rental competitor, result in fewer people contributing HOA dues and negatively affect housing values, among other problems, he speculated at the time.

On Monday, Beisswanger stressed leasing units is a short-term move. The Peloton, he said, is "not a long-term apartment community."

"The build-out of the condos was not based upon an apartment specification, but a condo specification," he said. "The first leases are very much consistent with the existing owners of the Peloton."

The leasing rates range from the high $1 to low $2 per square foot, he said.

He added that officials recently signed a lease with the operators of Lafayette's Morning Glory Cafe to open a restaurant in the space vacated by Gindi Cafe.

Jules Lieb, an owner of Morning Glory, said the second restaurant will be similar in some aspects to Morning Glory but will feature more small plates.

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